Cattle on feed down for 16th straight month

Cattle on feed on Dec. 1 was down 5.5 percent from a year ago, marking the 16th straigt month of year-over-year decreases. Analysts expect fed cattle slaughter to be lower for the foreseable future and expect feeder cattle prices in 2014 to average about 12 percent higher than 2013.

At 10.725 million head, cattle on feed on Dec. 1 in U.S. feedlots with 1,000-head capacity or more was down 5.5 percent from last year’s Dec. 1 count, according to the latest USDA-NASS report.

The drop marks the 16th straight month of year-over-year lower placements and the lowest Dec. 1 number since the current cattle on feed data series began in 1996.

The headcount was no surprise to analysts, coming in about 1 percent lower than pre-report estimates. Placements during November, down 3 percent from November 2012, however, were sharply lower than analysts expected.

On average, analyst had expected those placements to be almost 1 percent higher than last year, according to Steve Meyer and Len Steiner in their Daily Livestock Report.

USDA’s cattle on feed report continues to verify that fed cattle supplies will be tight for at least the first half of 2014. Recent cow prices and an interest in retaining heifers suggests fed-cattle supplies will be lower in the second half of the year as well, Meyer and Steiner stated.

“These lower inventory figures leave us singing the same song we have been singing for the past year: Lower fed cattle numbers for the foreseeable future,” they stated.

The average year-over-year decline for the past five months has been 6.2 percent, and fed cattle slaughter could easily be that much below year-ago levels over the next five to six months, they said.

Tight cattle supplies have led to strong beef calf prices all fall, Derrell Peel, livestock marketing specialist with Oklahoma State University, said in the University’s Cow’Calf Corner Dec. 23.

Steers under 500 pounds sold for $212 per hundredweight and higher the week of Dec. 16 at Oklahoma auctions, about 19 percent higher than a year ago. Seven-weight feeder steers were in the low $160s, 11 percent higher than a year ago. Feeder cattle are expected to average 11 percent to 13 percent higher in 2014 compared with 2013, he said.

The year-over-year number of cattle on feed on Dec. 1 dropped in eight of the 11 top cattle-feeding states, with inventories down more in the Southern Plains compared with the Midwest.

Texas and Kansas inventories were down 7 percent and 6 percent, respectively, from last year and Oklahoma’s inventory was down 23 percent. Feedlot inventories in Texas and Oklahoma represented less than 26 percent of the U.S. total for the first time since the data series began in 1996, Peel said.

Reduced feedlot production in the Southern Plains no doubt reflects the dramatic herd reductions in the region due to drought since 2010 but may also reflect longer term changes in cattle feeding competitiveness compared with the Midwest, he said.

“It was noted in 2007 that generally higher grain prices combined with increased availability of by-product grains in the Corn Belt would shift cattle feeding competitiveness somewhat to the Midwest relative to the Southern Plains,” he said.

It is difficult to separate long-term trends from short-term impacts, but time will tell, he said.